Residents living within homeowners associations failed to pay the required annual assessments to their homeowners associations ("Associations"). The resident's homeowners agreement provided for costs and attorneys' fees incurred by the Associations in recovering delinquent payment assessments. The Associations directed the law firm of Nagle & Zaller, P.C. to collect the delinquent payments.

After Nagle & Zaller failed to recover the debt through communications with the residents, the Associations filed suits against the residents. In all the cases, the District Court, sitting in Harford and Prince George's Counties, awarded affidavit judgments in favor of the Associations. The Associations also sought to recover attorneys' fees which they calculated using the lodestar method. The district courts rejected the Associations method of using lodestar numbers to calculate attorney's fees. Instead, the district courts awarded a flat percentage of the amounts of the principal. The Associations appealed to the Circuit Courts for Harford and Prince George's Counties. The Circuit Court for Harford County refused to award attorneys' fees for costs incurred on appeal and affirmed the amount the district court had awarded. The Circuit Court for Prince George's County also declined to award attorneys' fees for costs incurred on appeal and reduced the amount the district court had awarded.

Holding

The court held that use of the lodestar method in calculating attorneys' fees is inappropriate in contractual debt-collection cases. The court also held that trial courts should use Rule 1.5 of the Maryland Lawyers' Rules of Professional Conduct as a guide for determining reasonable attorneys' fees.

Court Reasoning

The Associations argued that the lodestar method was the proper method in calculating attorneys' fees. The court explained that the lodestar method should only be used to calculate attorney's fees when a case involves a fee-shifting statute. The court further noted that the lodestar method is appropriate in cases that further public policy goals. Because this case required the Residents to pay attorneys' fees by contract, these public policy considerations were not present. The court rejected the Associations' argument that important public interests were involved because homeowners associations provide important public benefits, noting that this breach of contract case between private parties did not involve a threat to the public interest.

The court explained that when dealing with a contract providing for attorneys' fees, trial courts should use the factors found in Rule 1.5 of the Maryland Lawyers' Rules of Professional Conduct as a guide for determining whether the fee is reasonable. In addition, the court advised that trial courts should also take into consideration the relative size of the award. Finally, the court noted that when a party agrees to attorneys' fees via contract, the trial court may consider the terms of the contract, but is not bound by them. Further, if a trial court considers the terms, it should consider the nature of the work performed and ensure that the rates for specific tasks are reasonable.

The court affirmed the amount that the Prince George's County Circuit Court awarded in Thomas-Ojo's case, finding that the court used the correct legal standard. The court also held that the Harford County Circuit Court did not abuse its discretion in the Tillery and Hamilton cases and affirmed the attorneys' fee awards.